Consulting in the Nordics: Know-how is not enough

Every now and then we talk to someone who, in the course of a single interview, perfectly encapsulates the opportunities and challenges of an entire market.

I was reminded of this recently as I was chatting to some senior executives in a Swedish company about how they use consultants.  “We need help in making strategic decisions about our business,” they said, “because the market is complex and, if we continually talk among ourselves, we’ll risk making assumptions which are no longer valid.  We also wouldn’t expect to hire full-time employees to work on such issues.”  It’s a classic rationale for consulting: the outside, independent view which it makes economic sense to bring in only when required.

But there are subtleties here: the problem, they continued, was that they couldn’t find consultants who really understood their business.  “Consultants don’t understand know enough about our industry well enough to help with the strategic issues.”  It echoes the point made by a company in Denmark which complained that the consulting firm they’d worked with (a well-known brand with apparently limitless expertise at its disposal) had developed a business case for a new product completely ignoring one of the major variables; “once this was taken into account, the business case fell to pieces,” the Danes said.

Without sufficient industry knowledge, consultants are being relegated to issues which are complex but essentially generic; important but not vital. “They can help with the context, but not with the core issue,” was how the Swedish executives summed it up.  The preference, strongly felt in the Nordic market, is to use small, local consulting firms, many of whom are highly specialised.  They’re also perceived to be better than their larger, global rivals at cultural change.

But, as our new report on the Nordic consulting market makes clear, the biggest consulting firms are mostly getting bigger.  So what accounts for this apparent contradiction?  Why aren’t small local firms able to exploit their knowledge-based advantage?  The answer lies in globalisation. More than ever before, Scandinavian companies have to compete on a global basis: they don’t just need the information about markets in other parts of the world that a big consulting firm can bring, but also the latter’s experience in cost-cutting and efficiency for multinational corporations.  “We’re a Nordic company,” said the Swedes, “but we have customers and operations all over the world.  If we want to optimise our cost base or be more efficient, then we’ll turn to one of the big consulting firms.”

A couple of years ago, we predicted a two-speed consulting industry in Europe, in which consulting firms which worked with multinational clients (or clients which aspired to be multinational) would grow much more quickly than those working with purely domestic organisations.  However, we also suggested that you couldn’t assume this would always favour the bigger firms: a global mindset and practical experience of other – primarily emerging – markets would also be valued by clients.  Boutique firms had opportunities to grow as well.  That two-speed world has certainly come to pass, but the winners have almost always been the big consulting firms.  Small firms have an inherent advantage because clients see their industry knowledge as a scarce and valuable commodity: the challenge now is to find ways of being able to leverage that knowledge on an international basis.